Finance Bill

Lord Davies of Oldham Excerpts

Monday 15th July 2013 Lords Chamber

[Lord Davies of Oldham]

My Lords, I shall leave that last contribution for the Minister to answer because it would be ill thought of me to intrude on coalition difficulties over an issue of that kind. I am sure the Minister will delight in replying to the noble Lord, Lord Bates, in a moment. I want to express, first, the gratitude of this side of the House to the Economic Affairs Committee and its chair the noble Lord, Lord MacGregor, for the work that they have done in this very important area. As the noble Lord indicated, there have been some advantages this year in being able to address these issues somewhat earlier than the actual arrival of legislation.

It has given them time also to concentrate in particular on the general anti-abuse rule. As the noble Baroness, Lady Wheatcroft, indicated, the proposals are sketchy enough at present that it is right that we return to evaluation of them fairly rapidly. I understand the Government’s resistance to the opposition amendment in the Commons on this matter for two years. However I take some succour from the point made by the noble Baroness, Lady Wheatcroft, that we will need to look at this carefully, not least because the problem with the GAAR is that it is a British concern but an international problem. It will work effectively only if we are able to broaden the similarities of other countries with regard to the operation of corporation tax and so on in their countries in order to make it effective.

The noble Lord, Lord MacGregor, indicated that although the committee had probed the Government, it had not got full clarity from them about how the GAAR would work. None of us is surprised by that—these are early days. However, none of us ought to underestimate either the enormous pressure from outside this House on the Government to do something about the scandals that were revealed of the avoidance of taxation—legitimate avoidance—by the multinational companies that have been identified, or the country’s obvious belief that fairness requires them to meet their dues in countries where they are making their profits and where they have vast numbers of customers.

We all recognise that this is a big challenge of the multinational age, which presents all Governments with very specific issues with regard to taxation. I am very grateful for the progress that the committee made on this matter but this is an enduring problem for us all and it will be recognised that the work done so far has merely proved a trailer for the major work that needs to be done. After all, Mr Aaronson, who commented on the general anti-avoidance rule, said that the scheme set out only to tackle egregious, unaggressive tax avoidance schemes. That indicates how narrowly focused it appears to him, as an expert. We need some breadth to it if it is to prove effective.

I welcome the contribution of the noble Lord, Lord Wakeham, although I did wince at the concept of two Finance Bills a year, as I am sure many Members of this House will and even more will at the other end. He made a very real and proper call for companies to be true and fair in their reports and in their responsiveness to the need for taxation. However, the problem there again is that we are not talking about the perspective of a decade or so ago but about a situation now where a great deal of British expenditure is on multinational companies in which these particular concepts may look a little too Anglo-Saxon, or even too British, to strike home with them. We clearly need a strategy that is embraced in our legislation but which fits with what other major powers, particularly of course the Americans, are able to do with regard to multinational challenges.

The Minister presented a short synthesis of the Finance Bill and I think we are all grateful for that—not many Ministers have been able to describe a Finance Bill in seven minutes. I am not going to criticise it for much more than seven minutes—indeed, I hope to criticise it in much less time—but criticise it I will. This Finance Bill does nothing to boost growth or improve living standards. Growth, as the Minister will recognise, is at an abysmal level and has been since this Government came to power. We are making the slowest recovery from a recession in the past 100 years and it will not do for the Minister to suggest that the Bill is apposite to our present circumstances. It is not.

The noble Baroness, Lady Kramer, commented on the fact that one element of the Bill gives some tax relief to the lowest paid in our society, but real wages have fallen by 2.4% in the past four years. That is a reflection of the fact that people are getting poorer at work—not the people who have to pay the bedroom tax and who the Government are able to challenge in those terms, nor those people who will be hit by the withdrawal of benefits, but people at work. They are poorer under this Government and it will not do for the Minister to ignore that fact; nor will it do—after all, he takes considerable responsibility for infrastructure—that the Government’s record on that at the present time is appalling. Of course, he was not directly in his post when the Government managed to produce only one school out of the 216 that the Secretary of State promised would begin under his programme of expansion.

The IMF made clear to the Government what could be done with investment. It said that £10 billion in social housing could produce circumstances in which 400,000 houses could be built and 600,000 jobs could be created. What have the Government done on that front? Nothing that any of us could notice. Meanwhile, this Finance Bill also causes affront to our people. This is not only over the question of how strongly it will address the issue of corporate taxation for the multinationals and those who do not pay their proper tax. How can one talk about fairness in our society when millionaires are singled out for the top-rate tax cut, and when hedge funds get a cut on their investment position as a result of the Bill?

The Government are giving away with one hand to the very well-off in our society, while the rest of the nation quakes under the strains of the Government’s failure to emerge from recession. That is why the Finance Bill, which we can merely comment on and not amend, has such weaknesses that the Minister surely ought to spend the next few minutes producing a rather more articulate defence of it than he did in his opening remarks.